<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: September 30, 1999
ARV ASSISTED LIVING, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-26980 33-0160968
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
245 Fischer Avenue, D-1
Costa Mesa, CA 92626
(Address of Principal Executive Offices and Zip Code)
(714) 751-7400
(Registrant's telephone number, including area code)
<PAGE> 2
Item 5. Other Events
ARV Assisted Living, Inc. ("ARV") and Emeritus Corporation ("Emeritus") have
entered into a settlement agreement dated September 30, 1999 (the "Settlement
Agreement"), settling the action entitled Emeritus Corporation v. ARV Assisted
Living, Inc., which was filed by Emeritus against ARV in the Superior Court of
the State of California, County of Orange (the "Action"). The parties did not
waive, admit or concede any liability for the claims asserted against ARV in the
Action. The Settlement Agreement provides for dismissal of the Action and that
no judgment will be entered. Pursuant to the Settlement Agreement, ARV paid
$1,500,000 to Emeritus and delivered to Emeritus a promissory note in the amount
of $3,500,000 (the "Promissory Note"). The maturity date of the Promissory Note
is May 1, 2001. ARV may prepay the note in its entirety with a prepayment
discount of $750,000 if prepayment is made before February 2000. The prepayment
discount decreases $50,000 each month thereafter until the maturity date.
The foregoing is a summary of only certain provisions of the Settlement
Agreement and the Promissory Note and is not intended to be complete. The
Settlement Agreement, the Promissory Note and ARV's press release dated October
1, 1999 are attached hereto as Exhibit 10.1, Exhibit 10.2 and Exhibit 99.1,
respectively, and incorporated herein by reference.
<PAGE> 3
Item 7. Exhibits
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Settlement Agreement dated September 30, 1999 by
and between Emeritus Corporation and ARV Assisted
Living, Inc.
10.2 Promissory Note of ARV Assisted Living, Inc.,
dated September 30, 1999
99.1 Press Release dated October 1, 1999
</TABLE>
-2-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARV ASSISTED LIVING, INC.
Date: October 7, 1999 By: /s/ Abdo Khoury
----------------------------------
Name: Abdo Khoury
Title: Senior Vice President,
Chief Financial Officer
-3-
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 Settlement Agreement dated September 30, 1999 by and between
Emeritus Corporation and ARV Assisted Living, Inc.
10.2 Promissory Note of ARV Assisted Living, Inc., dated September 30,
1999
99.1 Press Release dated October 1, 1999
</TABLE>
-4-
<PAGE> 1
EXHIBIT 10.1
SETTLEMENT AGREEMENT AND GENERAL RELEASE
THIS SETTLEMENT AGREEMENT is entered into on September 30, 1999 (the
"EFFECTIVE DATE," as defined herein), by and between Emeritus Corporation
("EMERITUS" or "PLAINTIFF") and ARV Assisted Living, Inc. ("ARV" or "DEFENDANT")
(Plaintiff and Defendant together being referred to herein as the "PARTIES").
RECITALS
A. Plaintiff and Defendant are parties to an action entitled
Emeritus Corporation v. ARV Assisted Living, Inc., Case No. 793420, which was
filed in the Superior Court of the State of California, County of Orange (the
"RIGHTS PLAN ACTION").
B. The Rights Plan Action was tried before the Honorable Bruce W.
Sumner on June 14, 15, 17, and 18, 1999.
C. The Court rendered a statement of decision on July 2, 1999,
awarding Plaintiff $5,405,482.00 in damages plus costs as provided by law (the
"DECISION").
D. Plaintiff asserts that it has incurred assessable costs in the
amount of $26,150.07 in the Rights Plan Action and that, as a result of the
Decision, it is owed the sum of $5,431,632.07.
E. Both Parties have concluded, without waiving, admitting or
conceding any liability for the claims asserted against Defendant, and believing
that each has meritorious positions on any appeal of the Decision, that they
will
<PAGE> 2
]
enter into this Settlement Agreement to avoid the further expense, inconvenience
and burden related to the Rights Plan Action.
AGREEMENT
Based on the foregoing facts and circumstances, it is agreed by and
between the undersigned, on behalf of Plaintiff and Defendant, that the Rights
Plan Action be settled, compromised and dismissed on the merits and with
prejudice on the following terms and conditions:
1. Defendant shall discharge the amount which Plaintiff contends is
owed to it as stated in paragraph D of the Recitals above on the following terms
and conditions:
(a) Contemporaneous with the execution of this Settlement
Agreement, but in no case later than September 30, 1999, Defendant
agrees to make an indefeasible payment of the sum of $1,500,000 to
Plaintiff. The sum shall be paid in immediately available funds to
Account No. 01533382 at Morgan Guaranty Trust Company of New York -
Delaware, an account held in the name of Plaintiff's counsel, Davis Polk
& Wardwell (ABA No. 031100238).
(b) Contemporaneous with the execution of this Settlement
Agreement, Defendant shall provide to Plaintiff a promissory note (the
"NOTE") in the amount of $3,500,000.00 and in the form attached hereto
as Exhibit B.
(c) Contemporaneous with the execution of this Settlement
Agreement, Defendant shall cause Rossmore Renovation, LLC, a
2
<PAGE> 3
Delaware limited liability company in which the Defendant is the sole
member, to execute and to provide to Plaintiff a guaranty together with
the subordination agreement attached thereto by Defendant (the
"GUARANTY") in the form attached hereto as Exhibit C, which guarantees
Defendant's obligations under the Note and hereunder, and a deed of
trust (the "DEED OF TRUST") in the form attached hereto as Exhibit D,
constituting a first deed of trust on the fee interest in the property
known as 445 North Rossmore, Avenue, Los Angeles, California (the
"PROPERTY") owned by Rossmore.
(d) Contemporaneous with the execution of this Settlement
Agreement, Defendant shall deliver, or cause the appropriate party(ies)
to deliver, all at Defendant's expense, the following executed documents
(the Request for Dismissal, the Guaranty, the Deed of Trust and the
documents listed below in (i) through (vi) and in paragraph 1(e) are
collectively the "RELATED DOCUMENTS"):
(i) an environmental indemnity agreement by Defendant
and Rossmore in favor of Plaintiff in the form attached hereto
as Exhibit E;
(ii) a financial officer's certificate by the chief
financial officers of Defendant and Rossmore addressed to
Plaintiff in the form attached hereto as Exhibit F;
(iii) an irrevocable commitment (the "TITLE COMMITMENT")
by Fidelity National Title Insurance Company (the
3
<PAGE> 4
"TITLE COMPANY") for its loan title insurance policy (the "TITLE
POLICY") in the amount of $3,500,000.00, dated the date of
delivery of the Deed of Trust, attached hereto as Exhibit G,
including the changes marked thereon, insuring Plaintiff as the
holder of a valid first deed of trust on the Property, subject
only to the exceptions listed in items 1 through 4 on Schedule
B-2 to the Title Commitment, and otherwise in form and substance
satisfactory to Plaintiff; and the Defendant will cause the
closing conditions listed in Schedule B-1 to the Title Commitment
to be satisfied and will pay the premium for the Title Policy;
(iv) copies of the organization documents of Defendant
and Rossmore (including without limitation certificates of
incorporation, by laws, limited liability agreements),
resolutions by each of Defendant and Rossmore authorizing the
execution, delivery and performance of the Related Documents
executed by it, and certificates of incumbency of the officers
executing the documents on behalf of Defendant and Rossmore,
respectively, all certified to by the Secretary/ies of Defendant
and Rossmore, respectively, and all in form and substance
satisfactory to Plaintiff;
(v) a long form good standing certificate with respect
to each of Defendant and Rossmore from the secretary of state of
the state in which it is organized and, if it is organized in a
state other than California, from the secretary of state of
California;
4
<PAGE> 5
(vi) an opinion of Douglas Armstrong, general counsel
for Defendant and Rossmore in the form attached hereto as Exhibit
H; and
(vii) financing statements relating to the Deed of Trust
in the form attached hereto as Exhibit I (the "UCC-1S").
(e) Within five business days of the Effective Date, Defendant
shall cause to be delivered a copy of the survey prepared by Van Dell
and Associates, Inc., dated March 5, 1999 (the "ORIGINAL SURVEY"),
redated to a date not more than 10 days prior to the date hereof,
certified to Plaintiff and the Title Company, and showing no changes in
the state of facts shown on the Original Survey.
(f) If (i) there is a Default (as defined in the Note)
pursuant to the terms of the Note, or (ii) Defendant has not prepaid the
principal amount of the Note in accordance with the prepayment schedule
as set forth in the Note, then Defendant shall pay to Plaintiff the
remaining sum of the amount identified in paragraph D of the Recitals,
i.e. the sum of $431,632.07, in cash on the earlier to occur of the date
of Default or the Maturity Date (as defined in the Note), which sum
shall become immediately due and payable on said date without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by Defendant; in the event of the indefeasible payment
in full of the Note by on or before April 30, 2001, unless there has
been a default under the Note, Plaintiff agrees to waive any claim for
said $431,632.07.
5
<PAGE> 6
2. Contemporaneous with the execution of this Settlement Agreement,
counsel for Plaintiff is hereby instructed to deliver to counsel for Defendant a
request for dismissal with prejudice of the Rights Plan Action in the form
attached hereto as Exhibit A (the "REQUEST FOR DISMISSAL"). Counsel for
Defendant is authorized to file the Request for Dismissal with the Orange County
Superior Court on the ninety-third day after the later to occur of (a) the
fulfillment by Defendant of its obligations under paragraph 1(d) above in a
manner acceptable to Plaintiff, (b) the recording of the Deed of Trust, or (c)
the filing of the UCC-1s, provided that neither Defendant not Rossmore has
instituted a proceeding for relief under the federal bankruptcy laws or had an
involuntary proceeding filed against either of them under such laws on or before
the later to occur of said ninety-three day period or the date of the filing the
Request for Dismissal. Plaintiff shall record the Deed of Trust and file the
UCC-1s as promptly as possible after receipt and in any event not more than two
business days thereafter. It is the intent of the Parties that the Rights Plan
Action shall be dismissed prior to the entry of judgment by the Court. To this
end, the Parties shall cooperate in making such requests and/or motions to the
Court as are necessary to seek a continuance of further proceedings (including
holding the Statement of Decision in abeyance) until such time as the Request
for Dismissal can be filed hereunder. Should the Court require some other
procedure to delay the filing of the Decision until this settlement is
consummated, the parties shall take such other actions as may be reasonably
required or appropriate to accomplish the same.
6
<PAGE> 7
3. Except as provided in paragraph 1, Plaintiff and Defendant shall
not be liable for each other's costs, fees or expenses, or the costs, fees and
expenses of their respective attorneys, experts, advisors, agents or
representatives, relating to or arising from the Rights Plan Action.
4. In light of the importance and sensitivity of the terms of this
Settlement Agreement to the Parties, the terms and amount of this Settlement
Agreement and the Note shall be confidential and shall not be disclosed to any
person. The Parties agree to issue a joint press release announcing this
Settlement in a form to be determined by the Parties and to make no further
statements about this settlement.
5. Notwithstanding the provisions of paragraph 4, the Parties may
disclose the terms and amount of this Settlement Agreement and the Note (i) to
the extent required by law or pursuant to an order or a subpoena by a court or
governmental agency of competent jurisdiction, (ii) to the extent necessary to
give notice to, or pursue any claim against, any insurer, (iii) to the extent
necessary to comply with the disclosure requirements of the securities laws,
(iv) to their respective accountants, auditors, actual lenders and/or
prospective lenders as is reasonably necessary, or (v) to enforce any part or
all of this Settlement Agreement and the Note. Notwithstanding the provisions of
paragraph 4, the Parties may file under seal with the Court (the Honorable Bruce
W. Sumner, Judge) a copy of this Settlement Agreement.
6. Except with respect to the obligations of Defendant and Rossmore
herein, upon filing the Request for Dismissal in accordance with the provisions
of
7
<PAGE> 8
paragraph 2, each Party (including for purposes of this paragraph its present
and former, and direct and indirect, parents, subsidiaries, divisions and
affiliates; its present and former stockholders, officers, directors, employees,
agents, legal representatives and insurers; and its predecessors, heirs,
executors, administrators, successors, purchasers and assigns) shall, and does
hereby, release and forever discharge the other Party (including for purposes of
this paragraph its present and former, and direct and indirect, parents,
subsidiaries, divisions and affiliates; its present and former stockholders,
officers, directors, employees, agents, legal representatives and insurers; and
its predecessors, heirs, executors, administrators, successors, purchasers and
assigns) from any and all manner of action or actions, causes of action, in law
or in equity, suits, debts, liens, contracts, agreements, promises, liabilities,
losses, claims, counterclaims, demands, attorneys' fees, costs or expenses,
damages and remedies, known or unknown, suspected or not suspected to exist,
fixed or contingent (the "CLAIMS"), which either Party now has or may have
against the other Party, by reason of any matter, cause or thing whatsoever from
the beginning of time to the date hereof, including but not limited to, Claims
arising out of, based upon, or relating to the fact of this settlement, the
Rights Plan Action, the tender offer by Plaintiff for the stock of Defendant,
and/or the transactions between Defendant, on the one hand, and Prometheus
Assisted Living, LLC, and/or Lazard Freres Real Estate Investors, LLC, or any of
their affiliates, on the other hand.
7. Plaintiff and Defendant hereby represent, warrant, and
acknowledge to the other that they have received independent legal advice from
8
<PAGE> 9
their respective attorneys regarding the advisability of executing this
Agreement and giving the releases provided for herein, and hereby acknowledge
the provisions of Section 1542 of the California Civil Code, which provides as
follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Plaintiff and Defendant, being aware of Section 1542, hereby expressly waive and
relinquish any rights or benefits they have or may have thereunder in connection
with the releases provided herein, as well as under any other California or
Federal statute or common law principle of similar effect. Each party
acknowledges that it is aware that it or its attorney may hereafter discover
facts different from or in addition to the facts which it or its attorney now
knows or believes to be true with respect to the subject matter of this
Agreement, but that it is their intention hereby to settle fully, finally,
absolutely and forever any and all claims, disputes and differences which do now
exist or heretofore have existed between Plaintiff, on the one hand, and
Defendant, on the other. In furtherance of this intention, the releases herein
given shall be and remain in effect as full and complete releases
notwithstanding discovery of any such different or additional facts.
8. Neither this Settlement Agreement (including all exhibits
hereto), nor the compromise and settlement provided for herein, nor any
statement made, action taken or documents prepared in connection with the
negotiation, execution
9
<PAGE> 10
or implementation of this Settlement Agreement, shall be deemed, construed, or
offered as evidence of any admission by either Party of any liability or basis
of liability or used for any other purpose in any litigation; provided, however,
that nothing herein shall in any way limit the use of this Settlement Agreement
and the Note as evidence in a proceeding to enforce any or all of the provisions
of this Settlement Agreement or Note.
9. This Settlement Agreement, the Note, and the Related Documents
shall be binding upon, and inure to the benefit of, the successors, assigns and
heirs of the Parties.
10. This Settlement Agreement, the Note, and the Related Documents
contain an entire, complete, and integrated statement of each and every term and
provision agreed to by and among the Parties; they are not subject to any
condition not provided for herein. This Settlement Agreement shall not be
modified in any respect except by a writing executed by all the signatories
hereto.
11. The Parties represent that they have been represented in the
negotiations for and in the preparation of this Settlement Agreement, the Note,
and the Related Documents by counsel of their own choosing; that they have read
this Settlement Agreement, the Note, and the Related Documents or have had those
documents read to them by their counsel; and that they are fully aware of their
contents and legal effect. Neither of the Parties hereto, nor their counsel,
shall be considered to be the drafter of this Settlement Agreement, the Note,
and the Related Documents or any provision thereof for the purpose of any
statute,
10
<PAGE> 11
case law or rule of interpretation or construction that would or might cause any
provision to be construed against the drafter.
12. All terms of this Settlement Agreement, the Note, and the Related
Documents shall be governed by and interpreted according to the substantive laws
of the State of California without regard to its choice of law or conflict of
laws principles.
13. Any notice or other communication hereunder must be given in
writing and (a) delivered in person, or (b) mailed by certified or registered
mail, postage prepaid, receipt requested, as follows:
If to ARV Assisted Living, Inc.,
addressed to: ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, California 92626-4539
Attention: Douglas M. Pasquale, President
If to Emeritus Corporation,
addressed to: Emeritus Corporation
3131 Elliott Avenue
Suite 500
Seattle, Washington 98121
Attention: Raymond R. Brandstrom
or to such other address or to such other person as any party shall have last
designated by such notice to the other party. Each such notice or other
communication as described herein shall be effective (i) if given by mail, three
days after such communication is delivered in the mails as provided above,
11
<PAGE> 12
whether or not accepted by the addressee, or (ii) if given by any other means,
when actually delivered to such address.
14. The signatories to this Settlement Agreement covenant and
represent that they are fully authorized to enter into and to execute this
Settlement Agreement.
15. The Parties covenant and represent that they have not assigned,
transferred or encumbered to any person, corporation, partnership, joint
venture, limited liability company or any other entity, any right, claim or
interest, they have or may have in any of the claims released herein. Each Party
agrees to indemnify and hold the other Party harmless from and against any
liabilities, claims, demands, damages, costs, expenses and attorneys' fees
incurred by that other Party as a result of any person asserting any such
assignment or transfer. It is the intention of the Parties that this indemnity
does not require payment as a condition precedent to recovery hereunder.
16. If any Party to this Agreement brings an action or proceeding to
enforce its rights hereunder, the prevailing Party shall be entitled to recover
its costs and expenses, including all costs and attorneys' fees, if any,
incurred in connection with such action or proceeding.
17. If any provision of this Agreement is determined to be invalid,
illegal or unenforceable, the remaining provisions of this Agreement shall
remain in full force and effect provided that the economic and legal substance
of the transactions contemplated is not affected in any manner materially
adverse to any Party. In the event of any such determination, the Parties agree
to negotiate in
12
<PAGE> 13
good faith to modify this Agreement to fulfill as closely as possible the
original intent and purposes hereof. To the extent permitted by law, the Parties
hereby to the same extent waive any provisions of law that renders any provision
hereof prohibited or unenforceable in any respect.
13
<PAGE> 14
18. This Settlement Agreement may be executed in counterparts.
Facsimile signatures shall be considered as valid signatures as of the date
hereof, although the original signature pages shall thereafter be appended to
this Settlement Agreement.
"PLAINTIFF"
EMERITUS CORPORATION
BY: ______________________________________
Daniel R. Baty
Its: Chairman and Chief Executive Officer
"DEFENDANT"
ARV ASSISTED LIVING, INC.
BY: ______________________________________
Douglas M. Pasquale
Its: President and Chief Executive Officer
APPROVED AS TO FORM
DAVIS POLK & WARDWELL
PHILLIP R. MILLS
By:____________________________________
Phillip R. Mills
Attorneys for Emeritus Corporation
LATHAM & WATKINS
MORRIS A. THURSTON
By:____________________________________
Morris A. Thurston
Attorneys for ARV Assisted Living, Inc.
14
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
$3,500,000.00 Los Angeles, California
September 30, 1999
FOR VALUE RECEIVED, the undersigned ARV ASSISTED LIVING, INC., a
Delaware corporation ("MAKER"), promise(s) to pay to the order of EMERITUS
CORPORATION, a Washington corporation ("HOLDER"), at 3131 Elliott Avenue,
Seattle, Washington 98121, Attention: Mr. Ray Brandstrom, or at such other place
as may be designated in writing by Holder, the principal sum of THREE MILLION
FIVE HUNDRED THOUSAND DOLLARS ($3,500,000.00) or so much thereof as may from
time to time be owing hereunder, with interest thereon, as hereinafter provided.
All sums owing hereunder are payable in lawful money of the United States of
America, in immediately available funds.
The outstanding principal balance of this note (this "NOTE"), together
with all accrued and unpaid interest, shall be due and payable in full on May 1,
2001 (the "MATURITY DATE").
For so long as Holder has not accelerated payment of amounts due under
this Note and no such event has occurred which (with or without the passage of
time or notice) would entitle Holder to so accelerate, Maker may prepay the Note
in its entirety during the Prepayment Period and for the Prepayment Amount set
forth in the schedule below (the "SCHEDULE") opposite the Prepayment Period
during which Maker makes and Holder receives such prepayment, and if Maker makes
and Holder receives such prepayment during a Prepayment Period set forth in the
Schedule in the Prepayment Amount set forth in the Schedule opposite the
applicable Prepayment Period, then the remaining principal amount of the Note
shall be forgiven.
<TABLE>
<CAPTION>
PREPAYMENT PERIOD PREPAYMENT AMOUNT
----------------- -----------------
<S> <C> <C>
1 November 1999 $2,750,000
2 December 1999 $2,750,000
3 January 2000 $2,750,000
4 February 2000 $2,800,000
5 March 2000 $2,850,000
6 April 2000 $2,900,000
7 May 2000 $2,950,000
8 June 2000 $3,000,000
9 July 2000 $3,050,000
10 August 2000 $3,100,000
11 September 2000 $3,150,000
12 October 2000 $3,200,000
13 November 2000 $3,250,000
14 December 2000 $3,300,000
15 January 2001 $3,350,000
16 February 2001 $3,400,000
17 March 2001 $3,450,000
18 April 2001 $3,500,000
</TABLE>
If there is a Default (as defined below) or if Maker has not prepaid the
principal amount of this Note as set forth above on or before April 30, 2001,
then on the Maturity Date, Maker shall pay the $3,500,000.00 principal amount of
this Note, together with interest thereon at the rate of ten percent (10%) per
annum (based on a 360-day year and charged on the basis of actual days elapsed).
<PAGE> 2
If: (a) Maker shall fail to pay when due any sums payable hereunder; or
(b) Maker shall fail to perform any non-monetary obligation hereunder and the
continuance of such failure for fifteen (15) days after notice, provided that
such 15-day period shall be extended to ninety (90) days if (a) it is possible
for Maker to observe or perform such covenant or agreement, (b) the Maker is
proceeding with due diligence to observe or perform such covenant or agreement,
and (c) the failure of Maker to observe or perform such covenant or agreement
has no adverse impact on this Note; or (c) any representation, warranty or
certification of Maker hereunder or any certificate or other document delivered
in connection herewith shall fail to be true; or (d) there shall occur any event
or condition which results in the acceleration of the maturity of any Material
Debt (as defined below) of Maker or enables (or, with the giving of notice or
lapse of time on both, would enable) the holder of such Material Debt to
accelerate the maturity thereof; or (e) there shall exist any judgment, lien or
order for the payment of money against Maker which continues unsatisfied or
unstayed for a period of more than ten (10) days; or (f) any person or group of
persons (within the meaning of Section 13 or 14 of the Securities Exchange Act
of 1934, as amended from time to time) (other than Prometheus Assisted Living
LLC, LF Strategic Realty Investors II L.P., LFSRI II Alternative Partnership
L.P., LFSRI II-CADIM Alternative Partnership L.P. or Lazard Freres Real Estate
Investors L.L.C., each a Delaware limited partnership or limited liability
company or any group consisting solely of one of more of the foregoing) shall
have acquired beneficial ownership of 30% or more of the outstanding shares of
common stock of Maker whether directly or indirectly or voluntarily or
involuntarily or otherwise or if Maker shall merge with or into any person,
unless Maker is the surviving entity in the event of such merger, or if a
majority of the board of directors of Maker consists of persons other than
current directors, persons nominated by them or successor directors who are so
nominated; or (g) a Default (as defined in that certain Guaranty Agreement dated
as of the date hereof by Rossmore Renovation, LLC, as guarantor, in favor of
Holder, as beneficiary (the "GUARANTY")) occurs under the Guaranty (each of the
events described in clauses (a) through (g) above and clauses (a) and (b) of the
following paragraph being herein referred to as a "DEFAULT"); THEN Holder may,
at its sole option, declare all sums owing under this Note immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by Maker; provided, however, that if this Note or any
document related to this Note provides for automatic acceleration of payment of
sums owing hereunder, all sums owing hereunder shall be automatically due and
payable in accordance with the terms of that document.
Furthermore, if (a) Maker shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or (b) an involuntary case or other proceeding shall be commenced
against Maker seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against Maker under the federal bankruptcy
laws as now or hereafter in effect; THEN, without any notice to Maker or any
other act by Holder, all sums owing under this Note shall become
2
<PAGE> 3
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by Maker.
For the purposes hereof, "MATERIAL DEBT" means any Debt of Maker having
an aggregate principal or face amount exceeding $500,000; "DEBT" of any Person
means, at any date, without duplication, (i) all obligations of such person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debenture, notes or other similar instruments, (iii) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which may or may not be capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a lien on any asset of such Person whether or not such Debt is
otherwise an obligation of such Person, and (vii) all guarantees by such Person
of Debt of another Person; and "PERSON" means an individual, a corporation, a
limited liability company, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Maker hereby represents and warrants that: (i) Maker is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all corporate powers and all material
governmental licenses, consents, authorizations and approvals required to carry
on its business as now conducted and, if it is not organized in California, is
duly qualified and in good standing under the laws of California; (ii) the
execution, delivery and performance by Maker of this Note, and the certificates
and documents executed by Maker delivered in connection with this Note (the
"RELATED DOCUMENTS") are within Maker's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of Maker's organization documents or by-laws or of any agreement,
judgment, injunction, order, decree or other instrument binding upon Maker or
result in the creation or imposition of any lien or encumbrance on any asset of
Maker; (iii) this Note and the Related Documents executed by Maker constitute
valid and binding obligations of Maker, enforceable in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally and general principles of
equity; (iv) the consolidated audited balance sheet of Maker and its
consolidated subsidiaries as of December 31, 1998 and the related consolidated
statements of income, cash flows and changes in stockholders' equity for the
fiscal year then ended, set forth in Maker's 1998 Form 10-K and delivered by
Maker to Holder, fairly present, in conformity with generally accepted
accounting principles, the consolidated financial position of Maker and its
consolidated subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year; (v) the unaudited consolidated
balance sheet of Maker and its consolidated subsidiaries as of June 30, 1999 and
the related consolidated statements of income, cash flows and changes in
stockholders' equity for the six months then ended, set forth in Maker's latest
form 10-Q and delivered by Maker to Holder, fairly present, on a basis
consistent with the financial statements referred to in clause (iv) above, the
consolidated financial position of Maker and its consolidated subsidiaries as of
such date and their consolidated results of operations and cash flows for such
six-month period (subject to normal year-end adjustments); (vi) since June 30,
1999 there has been no material adverse change in the business, financial
position, results of operations or prospects of Maker and its consolidated
subsidiaries, considered as a whole; (vii) there is no action, suit or
proceeding pending against, or to Maker's knowledge threatened against or
affecting, Maker or
3
<PAGE> 4
any of its subsidiaries before any court or arbitrator or any governmental body,
agency or official which could have a material adverse effect on the business of
Maker or which in any manner draws into question the validity or enforceability
of this Note or the Related Documents, except for the Lazard Freres Real Estate
Investors, LLC litigation and the General Electric Credit Corporation loan
defaults, as disclosed to Holder in writing; (viii) all information heretofore
furnished by Maker to Holder for purposes of or in connection with this Note or
the Related Documents or any transaction contemplated hereby or thereby is true
and accurate in all material respects on the date as of which such information
is certified or dated, and Maker is not aware of any changes, drafts or
circumstances that would make such information untrue or inaccurate in any
material respect; and (ix) Maker has disclosed to Holder in writing any and all
facts which materially and adversely affect, or may affect (to the extent Maker
can now reasonably foresee), the business, operations or condition of Maker or
Maker's ability to perform its obligations under this Note and the Related
Documents.
If any attorney is engaged by Holder to enforce or defend any provision
of this Note, or as a consequence of any Default, with or without the filing of
any legal action or proceeding, then Maker shall pay to Holder immediately upon
demand all attorneys' fees and all costs incurred by Holder in connection
therewith, together with interest thereon from the date of such demand until
paid at the rate of interest applicable to the principal balance owning
hereunder as if such unpaid attorney's fees and costs had been added to the
principal.
No previous waiver and no failure or delay by Holder in acting with
respect to the terms of this Note shall constitute a waiver of any breach,
default, or failure of condition under this Note. A waiver of any term of this
Note shall be limited to the express written terms of such waiver. In the event
of any inconsistencies between the terms of this Note and the terms of any other
document related to the loan evidenced by this Note, the terms of this Note
shall prevail.
If this Note is executed by more than one person or entity as Maker, the
obligations of each such person or entity shall be joint and several. No person
or entity shall be a mere accommodation maker, but each shall be primarily and
directly liable hereunder. Except as otherwise provided in any agreement
executed in connection with this Note, Maker waives: presentment; demand; notice
of dishonor; notice of default or delinquency; notice of acceleration; notice of
protest and nonpayment; notice of costs, expenses or losses and interest
thereon; notice of late charges; and diligence in taking any action to collect
any sums owing under this Note or in proceeding against any of the rights or
interests in or to properties securing payment of this Note.
Time is of the essence with respect to every provision hereof. This Note
shall be construed and enforced in accordance with the laws of the State of
California, except to the extent that federal laws preempt the laws of the State
of California, and all persons and entities in any manner obligated under this
Note consent to the jurisdiction of any federal or state court within the State
of California having proper venue and also consent to service of process by any
means authorized by California or federal law.
All notices or other communications required or permitted to be given
pursuant to this Note shall be given to the Maker or Holder in writing and shall
be considered as properly given if delivered personally or sent by first class
United States Postal Service mail, postage prepaid, except that notice of
Default may be sent by certified mail, return receipt requested, or by Overnight
Express Mail or by overnight commercial courier service, charges prepaid.
Notices so sent shall be effective three (3) days after mailing, if mailed by
first class mail, and otherwise
4
<PAGE> 5
upon receipt at the address set forth below; provided, however, that non-receipt
of any communication as the result of any change of address of which the sending
party was not notified or as the result of a refusal to accept delivery shall be
deemed receipt of such communication. For purposes of notice, the address of the
parties shall be:
Maker: ARV Assisted Living, Inc.
Rossmore Renovation, LLC, 245 Fischer Avenue, D-1,
Costa Mesa, California 92626; Attention: Douglas
Armstrong, Esq.; facsimile no. (714) 435-7102.
Holder: Emeritus Corporation, 3131 Elliott Avenue, Suite 500,
Seattle, Washington 98121; Attention: Ray Brandstrom;
facsimile no. (206) 301-4500.
With a copy to: Davis Polk & Wardwell, 450 Lexington Avenue, New York,
New York 10017; Attention: Phillip R. Mills, Esq.;
facsimile no. (212) 450-4800.
Any party shall have the right to change its address for notice
hereunder to any other location within the continental United States by the
giving of thirty (30) days notice to the other party in the manner set forth
hereinabove.
This Note contains or expressly incorporates by reference the entire
agreement of the parties with respect to the matters contemplated herein and
supersede all prior negotiations or agreements, written or oral. This Note shall
not be modified except by written instrument executed by all parties. Any
reference to the Note includes any amendments, renewals or extensions now or
hereafter approved by Holder in writing.
"Maker"
ARV ASSISTED LIVING, INC.,
a Delaware corporation
By: _____________________________
Name:
Title:
5
<PAGE> 1
EXHIBIT 99.1
FOR FURTHER INFORMATION:
For ARV: Suzanne C. Shirley
VP Investor & Public Relations
(714) 435-4359
FOR IMMEDIATE RELEASE
ARV ASSISTED LIVING AND EMERITUS CORPORATION REACH SETTLEMENT
COSTA MESA, CALIFORNIA, OCTOBER 1, 1999 - ARV Assisted Living, Inc. [AMEX: SRS]
and Emeritus Corporation [AMEX: ESC], parties in the action entitled Emeritus
Corporation v. ARV Assisted Living, Inc., pending in the Superior Court of the
State of California, are pleased to announce the resolution of all claims and
dismissal of this action. Without waiving, admitting, or conceding any liability
for the claims asserted in the action, the parties reached an amicable
settlement, which they believe is fair and equitable.
Founded in 1980, ARV is one of the largest providers of assisted living services
in the nation, operating 58 communities containing approximately 7,100 units in
10 states.
# # # # #
